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Chinese Private Banks Trumpet Home Market Advantage - Report

Tom Burroughes, Group Editor , 29 November 2018

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A report quotes domestic China and Hong Kong wealth managers saying they are well placed to tap new clients when compared with international firms, although the advantages are by no means all on their side.

Chinese banks have more options for bringing in people who can serve the region’s surging number of high net worth and ultra-high net worth clients, and have an edge over international players trying to grab chunks of the market, a report said. However, they need help in growing offshore investments, it continued.

A report by Bloomberg claims that domestic Chinese banks don’t face such a challenge as with firms such as UBS and Credit Suisse in gaining wealthy clients because they already have a large, established home market. However, such Chinese firms do need the ability to grow offshore investments, the newswire quoted people as saying. 

“We don’t need people to hunt for customers. We already have a lot of customers,” Joseph Tam, head of private banking at Industrial Bank Co in Hong Kong, was quoted saying. “Foreign banks are expanding their assets under management through hiring as they don’t really have the client pool.”

“Chinese banks can find private bankers through more channels,” Kenny Lam, group president of Noah Holdings, an asset manager for UHNW clients was quoted saying. “Most Chinese banks are servicing emerging high-net-worth individuals. They probably wouldn’t need someone from a company like UBS,” he said.

International banks such as UBS are hungrily targeting the Chinese market for UHNW individuals, and those among the Asian region as a whole. The competition to win this market is bound to remain fierce, with cultural awareness and sensitivity to local ways of doing business being important differentiators. 

The opportunities are huge: As UBS and PricewaterhouseCoopers noted in a recent report, 89 Chinese entrepreneurs became billionaires for the first time in 2017. That is three times more than the 30 who were minted in the US during the same year, or the 34 created in Europe, the Middle East and North Africa. China’s market is also young: Some 17 per cent of new Chinese billionaires founded businesses less than 10 years ago; in the US, the comparable share is 7 per cent. To put the figures into a global context, 199 self-made billionaires were created in 2017.

Across China, personal wealth is around $21 trillion for 2017, according to Boston Consulting Group. Other measures, such as those provided in the annual Capgemini World Wealth Report, show rapid wealth growth in the region, with China in the driving seat.

(Editor's comment: The report and the comments make sense to a certain degree. If you are a local bank, with an established brand, and maybe have worked with HNW clients during their ascent up the business ladder, you are going to be in a good place to take them into the wealth management side of the business. That said, people in Asia are still, as far as this publication can tell, keen on the big-brand banks in some ways, not least because of their perceived ability to get access into markets across the world, pull in global expertise, and share cross-border ideas. Given the pace of change, there is a big enough pie to go round. The issue could become more taxing if, or when, the domestic firms, such as ICBC and China Merchants Bank, decide to become more international. And firms such as Singapore's DBS, OCBC and UOB will not stand still, of course. With some European players such as Barclays and Societe Generale selling local Asian private banks in recent years, it is clear that this vast market is changing, and there's all to play for.)

 

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